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The Effects of Competition Between E-Commerce and Retail Giants

There is a very interesting recent trend in the retail and e-commerce industries that can be seen in the activities of the two leaders of each industry, Wal-Mart and Amazon. As the customer base for both firms has blended together, so too have the strategies of the industry leaders. Both Wal-Mart and Amazon have adopted new plans and policies that are ultimately turning the two retail giants into much more similar companies. The good news, of course, is that this is all for the benefit of consumers. And when we are talking about Wal-Mart and Amazon, the consumer base is almost the entire American population.

Wal-Mart has implemented a new discount policy to help its online sales, in a move more in Amazon’s direction. Large items that are expensive to ship will now be discounted if customers choose the in-store pick up option. Wal-Mart saves money by using its extensive fleet of delivery trucks to move these products from warehouses to stores, rather than the more expensive option, shipping to customers’ homes. The company has also made some large purchases of smaller tech start-ups to improve its online presence.

Amazon’s most recent plan seem to be a step in the opposite direction. They have been opening physical stores across the country, with the primary focus being on their grocery store. Although it is a physical store, it is not a traditional grocery store. Customers download an app that registers when they walk in the door. Then, as customers pick up items, it automatically adds them to their online cart, and charges them when they walk out the door.

The competition between these two industry leaders has two broad effects. Consumers will be better off, and low-wage employees will be worse off. The competition between these two giants has created a price war, in which the American consumer will always come out on top. And again, the massive size of these companies makes it safe to say that the vast majority of American consumers are affected by this. These two firms, and other firms in the industries, are adopting strategies to make it as cheap and easy as possible for our preferences, as consumers, to be met. The introduction of new technologies and internet shopping has only made that process move faster.

Unfortunately, the introduction of technology could severely hurt low-wage workers and small businesses. If stores like the Amazon grocery store start to catch on, which seems highly likely because they are incredibly efficient for consumers, then every other grocery store, and later on maybe just every other physical store, will have to adapt to Amazon’s technology. This will put small businesses that cannot adapt out of business, and will take away the majority of jobs in these stores, replacing them with technology.

Overall, the competition between companies like Amazon and Wal-Mart, and the blending of physical retailers with e-commerce and technology, is great for consumers, and will continue to be great. However, if I owned or worked at a grocery store, I would not be so optimistic about my job security a few years down the line.

3 thoughts on “The Effects of Competition Between E-Commerce and Retail Giants”

Sean, interesting take. I agree that Walmart and Amazon are making shopping easier for consumers and taking away from small business. But, I think it could be a slippery slope for consumers if Walmart and Amazon both adopt similar platforms that charged extremely high prices for their services. I think we see this through the wireless phone industry where AT&T, Sprint, and Verizon control the market. Consumers do not benefit in this market and I only hope that Amazon and Walmart do not collude for the sake of profits and consumers receive the short end of the stick again.

Nice post Sean. I wonder what the stats are on how many small businesses depend on food sales. I also wonder how many baggers at large grocers are less than 18 years old. I know many high schoolers in my town got jobs to bag groceries, which makes me wonder how big of an effect the Amazon go technology would have on the older workers.

I have my doubts about whether grocery shopping will ever be significantly replaced by online services. The current delivery services are expensive compared to brick and mortar stores, and require an element of food planning way beyond what I am able to do. But I could certainly be wrong about this.